Environmental issues, including climate change, should be paramount in investors’ minds if they want to reap rewards and avoid risks, said Jens Peers, CEO and chief investment officer for Mirova U.S.
Investors need to use every bit of information they can get to make smart investing decisions, and that includes how companies impact the environment and society, said the executive for Mirova, an asset manager based in Boston and Paris with $24 billion in assets under management globally. Mirova focuses on sustainable investing.
“If investors are not integrating ESG (environmental, social and governance) information into their investment decisions, they are not working with all of the information that is available,” Peers said in an interview yesterday.
An aspect of environmental factors that need to be part of the investment decision is how industries are transitioning to accommodate the impact of climate change. Energy and utility companies that are moving away from fossil fuels and toward renewable energy have more investment opportunities than ones that are burning fossil fuels, Peers said.
Orsted, a Danish multinational utility company that is dedicated to promoting green energy, is a good example of a power company that is embracing new technology to mitigate climate change, Peers said.
“You only have to look at events like Hurricane Ida and the Western United States wildfires to see the devastating effects of climate change.” he added. Companies that ignore these events, and others, such as droughts in the U.S. West, are putting their investors at risk, he added.
Weather events are going to be more severe and more frequent in the future and put more assets at risk, he said, adding that investors need to look at companies that are not vulnerable to these risks. Ignoring the risks will be costly to the investor, the company and the world, he added.
“The wildfires have pushed some utility companies to the brink of bankruptcy,” a fact that investors need to be cognizant of, he said. Investors and their advisors also should be looking at such things as whether a company needs access to a huge water source, because that may not always be available, he said.
“Automobile companies that do not have enough invested in low-carbon cars are not going to be a good bet in the future,” he added.
Companies with diverse boards and workforces make better decisions and have more opportunities to increase the profit margin, he said.